Aldi SWOT Analysis

Strengths

In the 12 weeks coming up to the 21st of May, Aldi sales rose by 19.8%, in comparison to the big four supermarkets of the U.K., Asda, Tesco, Morrisons and Sainsbury's, whose sales grew collectively by a mere 1.6% (Butler, 2017b).

The rapid growth of Aldi has seen the organisations combined market share rise to 12% as a result of around 1.1 million additional customers visiting their stores (Butler, 2017b).

The reputation of Aldi is one of providing comparable quality to the leading brands at notably lower prices than any of the brands competitors, a reputation which according to the chief executive of Aldi UK and Ireland presents a unique offering that resonates in the mind of the British consumer and has resulted in the store opening 70 new stores in 2017 in line with customer demand (Butler, 2017a).

Aldi is named the best supermarket of the year for the fourth time in 2017 in The Loved By Parents Awards (Aldi, 2017b).

Weaknesses

Despite Aldi being a discount retailer, they still had to increase prices of certain products, namely basic groceries including milk and bananas, as the fall in the pound hit, detracting from their traditionally cheaper reputation (Butler, 2016). In doing so, Aldi put itself at just 1 pence cheaper than Tesco, Morrisons and Sainsburys for Milk, and the same price as Asda (Butler, 2016).

While Aldi has experienced high growth in 2017, it is still far behind the big four British supermarkets in terms of market share, with Tesco having a 28% share, Sainsburys a 16% share, Asda a 15.1% share and Morrisons a 10.6% share (Cox, 2017).

Opportunities

Recently, a number of Aldi products have been named as being the best in the world, or as being superior alternatives to high-end products. One example of this can be seen in an Aldi gin being names as the best in the world by experts, despite costing less than £10 (Becquart, 2017), and another being the Lacura exfoliating masks which beauty bloggers have heralded as being as good as a high-end version costing £39 (Am, 2017). This presents the opportunity for Aldi to keep developing and expanding such products, in order to develop and expand its lines selling such products (i.e. its beauty and alcohol ranges).

Aldi plan to create 4000 jobs in the UK, as part of its expansion plans amid increasing sales, and aims to increase its number of stores from 700 to 1000 by 2022 (Bury, 2017). One opportunity for Aldi is to adopt a similar strategy to Tesco, by increasing its visibility and place on the high street by opening Express stores, that is smaller stores with the essentials required by consumers.

Threats

After Amazon took over American grocers Whole Foods, the supermarket industry of the U.K is anxious that a takeover of market share by Amazon could occur (The Guardian, 2017). While Whole Foods have only 9 U.K. subsidiaries, supermarkets are wary given that the goal of Amazon is often the global domination of a market, meaning that Aldi could potentially lose some of their market share in the U.K. (The Guardian, 2017).

Aldi is not the only German firm growing and accelerating its market share in the U.K. market. Lidl currently holds a 5% share of the grocery market in the UK, and is expected to overtake high end grocery store Waitrose to become the seventh biggest chain (Butler, 2017b). Moreover, the sale of on label supermarket brands rose by 6% year on year, as opposed to only a 0.6% rise in branded products, meaning that the current success of Aldi in terms of growth may be compromised by shoppers preferring cheaper alternatives from Lidl or home brands.

Reports from July 2017 indicate that Asda are currently considering a takeover bid on the British discount chain B&M, as an attempt to diversify when faced with increasing competition from cheaper rivals such as Aldi (Topham, 2017). Given that Asda are currently the third-biggest supermarket chain of the UK, and as a subsidiary of American supermarket giant Walmart possess the experience and funding to navigate the grocery market, the acquisition of 500 B&M stores as an outlet for products could see Asda increase their visibility and market shares, and reduce the sales of Aldi.

Farrell, P. (2016) 'Aldi and other oregano suppliers promise to turn over new leaf after ACCC investigation.' The Guardian. [Online] [Accessed on 21 July 2017] https://www.theguardian.com/australia-news/2016/nov/09/aldi-and-other-oregano-suppliers-promise-to-turn-over-new-leaf-after-accc-investigation

Topham, G. (2017) 'Asda considers bid for B&M that would give it access to local stores.' The Guardian. [Online] [Accessed on 23 July 2017] https://www.theguardian.com/business/2017/jul/23/asda-considers-bid-for-bm-that-would-give-it-access-to-local-stores